Jonathan Davis | Investment Strategy

Markets are “the wrong side of fair value”

With fears about Greece still in the headlines and anticipation of the Federal Reserve’s first interest rate rise the cause of much speculation, you can read a measured view of the outlook for markets in an Independent Investor interview with Sandy Nairn, the CEO of the successful boutique fund management group Edinburgh Partners. With equity

Big names and bragging rights

Those who happen to call the markets right and expose consensus thinking in one year are invariably accorded enhanced status and media bragging rights the next, although it rarely follows that they are right the next year as well. However, as things stand, it is hard to quibble with too much that Jeff Gundaich, the big name US investor who correctly warned that bond yields would fall not rise in 2014, thereby confounding the majority professional view, has to say about the outlook for 2015. Here is an extract from Gundlach's remarks at an industry conference, as reported by ETF Report.

Inveighing against “economic vandalism”

As that great financial innocent P.G.Wodehouse reminded us in another context, it is never difficult to distinguish between a Scotsman with a grievance and a ray of sunshine. But it is not hard to warm to Bruce Stout, the lead manager of one of Scotland's most successful investment funds, as he outlines his rage at the “economic vandalism” which the world's monetary authorities have inflicted on savers in the years since the global financial crisis. Mr Stout, a softly spoken son of Dundee, is the lead investment manager for Murray International, a global income trust which has defied conventional thinking and years of relative obscurity to grow rapidly to rank in the top five of the UK's investment trust sector. The object of his ire is the policy of quantitative easing, the centrepiece of the unconventional monetary policy that central bankers have turned to in their desperation somehow to cough their stuttering and debt-laden economies back into life. (This is the original, slightly fuller version of the interview with Bruce Stout, manager of the Murray International investment trust, which appears in the November 7th issue of The Spectator).

Stock market bubbles under the microscope

My thanks to Tim du Toit, founder of EuroshareLab, an excellent Europe-wide stock screening service, for alerting me to this interesting and sensible academic perspective on stock market bubbles – how to measure them, what to think about them, how to react to them. The author is Aswath Damodoran, a professor at the Stern School

The Fed will not take away the punchbowl of easy money soon

Equity investors, says one leading US fund manager, quoted in a prominent national newspaper this week, are “having a hard time” finding anything fundamental to worry about, given the fact that the Federal Reserve has “made plain that we will have easy money for years to come”. Perhaps I should get out more – or at least spend time with a wider sample of the investment community, as my experience is quite the reverse. Most thoughtful investors I speak to are having a hard time not worrying about the implications of the recently reiterated public policy stance of the 100-year-old US central bank.

Interview with Terry Smith

Terry Smith, the CEO of Tullett Prebon and founder of Fundsmith, was in top form when I interviewed him last week. An edited version of our conversation, which covers a range of topics, including the global economy, the impact of QE, current market valuations and stocks in the Fundsmith portfolio, appears in today’s issue of

Two events in October

Two events in my diary which you may be interested in. (1) Face to Face with John Kay: Martin Vander Weyer, Business Editor of The Spectator, and I are hosting an hour-long session of Q and A /debate with the prominent economist, author and FT columnist John Kay in London on October 22nd, starting at

Nixon and “Goosing the Money Supply”

I have no inside knowledge on whether Janet Yellen or Larry Summers is most likely to be given the job as the next chairman the Federal Reserve. It is not an exaggeration however to suggest, however, as many commentators have already noted, that this is probably the most important appointment that Mr Obama is likely to make in the course of his second term. If the media reports are to be believed, the White House is pushing the claims of the imperious Mr Summers over those of Mr Bernanke's deputy, even though the former will face the tougher ride at Senate confirmation hearings.

The Art and Artifice of Fed-Watching

Mr Bernanke's pronouncement about the possible tapering of QE - call it a promise, call it a threat, according to taste - sent global financial markets in June into a spin. That is emblematic of the bizarre ways in which financial markets sometimes behave, for if tapering were indeed to begin in September or soon after, it would be a mostly positive development for anyone who still retains the capacity to think things through for the longer term. It would be ironic if fear of a negative market reaction was to jeapordise that outcome.

Fannie Mae Is a Needless and Risky Model for UK Housing

There are many lessons to be learnt from the financial crisis. But the need for countries to establish institutions such as Fannie Mae is not one of them. The failure and abrupt nationalisation of the US's Federal National Mortgage Association was at the heart of that crisis. Yet George Osborne, Britain's chancellor, has announced plans to introduce similar state-backed mortgage guarantees, with proposals for a “Help to Buy” scheme to underwrite mortgage lending.